Public may turn ‘hostile’ if govt messes with tax

Daniel BurdonDaniel Burdon is APN Australian Regional Media's Canberra bureau reporter, covering federal parliament and politics. He was previously a rural and general news reporter at the Morning Bulletin in Rockhampton and worked in Alice Springs for the Centralian Advocate.

A MAJOR accounting firm has urged the Turnbull government not to target people's work-related tax deductions, warning any changes will be "met with hostility".

The warning has come in a submission to a government-led inquiry into tax deductions that is understood to be "softening the ground" ahead of Treasurer Scott Morrison's first budget in May.

While the government has reportedly abandoned income tax cuts in favour of a company tax cut this budget, it is understood to be exploring potential savings by reining in work-related tax deductions.

The submission from tax accounting firm H&R Block said the popularity of the deductions was a key reason they had remained in place through many reviews of the tax system.

"The majority of taxpayers believe that they should be entitled to claim both their workplace deductions and the cost of managing their tax affairs against taxable income," the submission reads.

A Parliamentary Budget Office submission to the inquiry showed work-related deductions came to $19.7 billion - almost two thirds of the $31.3 billion in personal tax deductions claimed in 2012-13.

The PBO submission said deductions for the cost of charitable donations and managing tax affairs came to $2.9 billion in 2012-13, or 9.3% of personal deductions.

The H&R Block submission argued, however, that "Australians would baulk at the prospect that from now on, (work-related costs) would be their liability and their liability alone".

"Surveys have shown time after time that any proposal to remove these entitlements would be met with hostility by the taxpaying public, even if - as seems likely - the pill is sweetened with some sort of incentive," it reads.

The firm said internal surveys showed many taxpayers would support broadening the deductions to include specialist licences, prescription glasses and tertiary education.